A federally funded recovery program should be created to make the Compensation Scheme of Last Resort more sustainable, financial advisers say.

Financial Advice Association Australia makes the proposal in a budget submission to Treasury after the scheme required a $47.3 million special levy to cover its 2025-26 deficit.

The association says the scheme provides a “pathway” for consumers to pursue unpaid Australian Financial Complaints Authority determinations.

“However, this places the CSLR in a position where they need to then seek recovery from the firms where funds may be available or recovery action may be possible against the firm, directors or officers.

“Pursuing this action often requires funding, and the administrators/liquidators seem very hesitant with respect to the pursuit of these matters.

“Equally, the CSLR may not be designed or resourced to undertake this activity. The outcome is that often those who are responsible go unchallenged, which ultimately undermines confidence in the system as a whole.” 

The association says its proposal is a “further measure to improve the sustainability of the CSLR ... The pursuit of this recovery activity, including the availability of resources to investigate the underlying conduct, is important in seeking to minimise the cost to those who would otherwise need to contribute to the cost of funding claims paid by the CSLR.

“We believe this role could be played by an entity established and funded by government as a ‘friend of CSLR’.”

The submission also recommends ways to increase the pool of advisers; simplify and enhance the tax deductibility of advice; and lower the Australian Securities and Investments Commission levy.